On January 11, 2019, USTR replied, telling Senator Kaine an exclusion process will not be initiated on List 3 unless negotiations fail with China and the President raises the tariff on the $200 billion worth of goods from 10 percent to 25 percent. Currently, President Trump has agreed to delay the implementation of the higher tariff until March 2, 2019.

USTR’s reply also addressed Chinese goods admitted into a Foreign Trade Zone (FTZ). The letter said, “Understandably, every importer, including importers who make use of FTZs, would prefer a special exemption from the additional tariffs. As of this time, we have not found a basis for exempting U.S. importers who use FTZs from the additional duties, when those duties apply to all other U.S. importers.”

The notice provided the following guidance regarding exclusions granted by USTR:

On December 28, 2018, the U.S. Trade Representative published Federal Register Notice 83 FR 67463 announcing the decision to grant certain exclusion requests from the 25% duty assessed on goods of China with an annual trade value of approximately $34 billion (Tranche 1), as part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. The product exclusions announced in this notice will apply as of the July 6, 2018 effective date of the $34 billion action (see Federal Register 83 FR 28710), and will extend for one year after the publication of this notice.

At the conclusion of the government funding hiatus, CBP will issue instructions on entry guidance and implementation. Any updates to the Automated Customs Environment (ACE) will be implemented 10 business days after the shutdown has concluded. Until these updates are completed, entry and entry summaries must be submitted without the Chapter 99 product exclusion number referenced in 83 FR 67463. Entry and entry summaries will be rejected by ACE if the Chapter 99 product exclusion number referenced in 83 FR 67463 is transmitted.

Once CBP issues guidance and implements ACE enhancements, a Post Summary Correction (PSC) or a Protest may be submitted for a refund.

All questions related to Section 301 entry filing requirements should be emailed to traderemedy@cbp.dhs.gov. After the funding hiatus, questions from the importing community concerning ACE rejections should be referred to their ABI Client Representative.

The USTR published a Federal Register Notice announcing its yearly “special review” to identify countries that deny adequate and effective protection of intellectual property rights (IPR) or deny fair and equitable market access to U.S. persons who rely on intellectual property protection under Section 301 of the Trade Act of 1974 (Section 301). Based on this review, the USTR will determine whether to identify “Priority Foreign Countries” defined under Section 182 of the Trade Act of 1974.

Priority Foreign Countries are countries for which the USTR can implement an investigation pursuant to Section 301 to determine whether certain trade measures are appropriate to address a country’s restrictions on trade and intellectual property rights. The most recent investigation under Section 301 occurred in 2017 and 2018 and resulted in the USTR implementing tariffs on approximately $250 billion of imports from China.

The USTR requested that interested parties provide written comments to identify “countries whose acts, policies, or practices deny adequate and effective protection for intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection.” The Special 301 provisions also require the Trade Representative to identify any act, policy, or practice of Canada that affects cultural industries, was adopted or expanded after December 17, 1992, and is actionable under Article 2106 of the North American Free Trade Agreement (NAFTA).

The USTR requested that interested parties file written comments that identify acts, policies, or practices that may form the basis of a country’s identification as a Priority Foreign Country or placement on the Priority Watch List or Watch List by February 7, 2019. USTR also requests that parties file notices of intent to appear at the public hearing by February 21, 2019. The public hearing will be held on February 27, 2019. Parties who testified at the hearing must submit posthearing written comments by March 5, 2019. The USTR indicated that it will publish the 2019 Special 301 Report on or around April 26, 2016.

]]>https://www.cmtradelaw.com/2018/12/first-section-301-list-1-product-exclusions-published-in-federal-register/feed/0USTR Grants First Section 301 List 1 of Product Exclusionshttps://www.cmtradelaw.com/2018/12/ustr-grants-first-section-301-list-1-of-product-exclusions/
https://www.cmtradelaw.com/2018/12/ustr-grants-first-section-301-list-1-of-product-exclusions/#respondWed, 26 Dec 2018 21:00:04 +0000https://www.cmtradelaw.com/?p=3391Continue Reading]]>On December 21, 2018 USTR submitted for publication a Federal Register Notice with the first list of products excluded from Section 301 Tariffs on certain products from China. The Products were originally published on the USTR’s “List 1” which included $34 Billion worth of imports from China. The USTR granted 984 individual exclusion requests involving 21 separate HTS codes. An index of all “List 1” exclusion requests and their status in the review process was also released by the USTR.

Once published in the Federal Register, the product exclusions apply as of the July 6, 2018 effective date of “List 1,” and will extend for one year after the publication of this notice. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.

On December 1, President Trump and President Xi reached agreement on the margins of the G20 in Buenos Aires to delay an increase on the third, $200 billion tranche of Section 301-related tariffs from 10% to 25%, which was originally set to take place January 1. According to the White House, the two sides will now begin a 90-day period of talks to resolve “structural” issues around IP theft, non-tariff barriers, and forced technology transfer. The White House said the tariff increase would be implemented at the end of the 90-day period if no agreement is reached.

According to the White House, China has also agreed to “purchase a not yet agreed upon, but very substantial amount of agricultural, energy, industrial and other product from the United States to reduce the trade imbalance.” Soybeans, other agricultural products, and energy products were reportedly included. China has not yet indicated whether this commitment will take the form of a policy change (such as a reduction in retaliatory tariffs on U.S. agriculture exports) or whether it will be left up to private-sector entities (as when EU Commission President Jean-Claude Juncker committed to purchasing U.S. soybeans as part of its agreement last July).

Following the meeting, President Trump said China also agreed to reduce 40% tariffs (25% of which is retaliation for U.S. tariffs) on U.S. automobile exports, though China has not confirmed that it will do so.

The latest agreement is a small, but positive step toward repairing the U.S.-China trade relationship. It likely postpones the risk of a fourth tranche of tariffs on another $267 billion in Chinese imports, which the Trump administration has previously threatened to impose, beyond the 90-day period. President Trump’s appointment of U.S. Trade Representative (USTR) Robert Lighthizer, who managed to conclude the renegotiation of NAFTA, as the lead for the 90-day talks suggests that serious negotiations will take place.

However, the gulf between what the U.S. is purportedly seeking—structural and meaningful economic reform—and what China seems currently prepared to offer remains wide. Much will depend on the Trump administration’s level of ambition. Companies with interest in China should ensure that the U.S. government is aware of opportunities to address their trade issues in China as well as the specific business risks arising from the current trade conflict (in particular any risks to U.S. jobs and economic growth).

]]>https://www.cmtradelaw.com/2018/12/u-s-and-china-agree-to-90-day-trade-truce-to-negotiate-structural-trade-issues/feed/02018 Midterm Elections Update: Impact on U.S. Trade Policyhttps://www.cmtradelaw.com/2018/11/2018-midterm-elections-update-impact-on-u-s-trade-policy/
https://www.cmtradelaw.com/2018/11/2018-midterm-elections-update-impact-on-u-s-trade-policy/#respondWed, 07 Nov 2018 22:39:15 +0000https://www.cmtradelaw.com/?p=3300Continue Reading]]>The 116th Congress begins on January 3, 2019. Based on projections from yesterday’s midterms, Democrats will control the House of Representatives by a narrow margin, while Republicans will expand their hold on the Senate. The changes to Congress are likely to shape trade policy through 2019, but much will depend on how House Democrats use their new majority, and whether trade is a priority issue or whether it will be overtaken by domestic issues.

Companies will have to carefully navigate the new political environment in order to advance their policy objectives. In addition to accounting for the hard-nosed approach to trade taken by the current administration, an effective policy engagement strategy will have to account for the new political dynamics created by newly empowered House Democrats and a potentially polarized Congress. Companies should be prepared to intervene on issues that are likely to come up in 2019, including: ratification of the U.S.-Mexico-Canada Trade Agreement (USMCA); trade negotiations with the EU, Japan, and the UK; and the ongoing U.S. tariff interventions on China and for sensitive sectors.

Below is our best forecast for the makeup of the trade- and foreign affairs-related committees for the 116th Congress, and their voting record on key pieces of trade legislation:

NAFTA
(1994)

China PNTR
(2000)

U.S.-Colombia FTA (2012)

Korea-U.S.-FTA (2012)

TPA**
(2015)

House Ways and Means

Chair: Richard Neal (D-Massachusetts)

Nay

Yea

Nay

Yea

Nay

Ranking Member: Kevin Brady (R-Texas)

N/A

Yea

Yea

Yea

Yea

House Foreign Affairs

Chair: Eliot Engel (D-New York)

Nay

Nay

Yea

Nay

Nay

Ranking Member: Michael McCaul (R-Texas) OR

N/A

N/A

Yea

Yea

Yea

Joe Wilson (R-South Carolina)

N/A

N/A

Yea

Nay

Yea

Senate Finance

Chair: Chuck Grassley (R-Iowa) OR

Yea

Yea

Yea

Yea

Yea

Mike Crapo (R-Idaho)

Nay (as House member)

Yea

Yea

Yea

Yea

Ranking Member: Ron Wyden (D-Oregon)

Yea

Yea

Yea

Yea

Yea

Senate Foreign Relations

Chair: Jim Risch (R-Idaho)

N/A

N/A

Yea

Yea

Yea

Ranking Member: Bob Menendez (D-New Jersey)

Nay

Nay

Nay

Yea

Nay

* China Permanent Normal Trade Relations
** Trade Promotion Authority

We expect the following impacts on 2019 U.S. trade priorities:

Impact on U.S.-Mexico-Canada Trade Agreement (USMCA)

The new USMCA is expected to be signed at the end of this month. USMCA would have likely passed in a Republican-held Congress on a bumpy but ultimately consistent trajectory. It will still likely enjoy broad backing in the Republican Senate. With Democrats now in control the House, there may be some new challenges to ratification.

Some of the new provisions in USMCA give cover for Democratic support—including the new wage-based rule of origin for autos and new enforceable labor rules, along with the weakening of investor-state dispute settlement. The Advisory Committee for Trade Policy and Negotiations (ACTPN), which includes the leaders of United Steelworkers and the International Brotherhood of Teamsters, last week expressed unanimous support for the agreement. But these changes still might not be enough to gain wide Democratic support. The Labor Advisory Committee for Trade Policy and Negotiations (LAC) noted several reservations on the agreement. Major environmental groups are also already preparing for a major advocacy campaign against USMCA. We expect House Democrats to seek additional concessions from the administration, particularly on the enforceability of the new labor provisions, on the environment, or possibly in the area of intellectual property protections.

If USMCA is signed on November 30, the U.S. International Trade Commission (USITC) would have to publish a study on its probable economic impacts by March 15, 2019, according to Trade Promotion Authority (TPA) procedures. The agreement could theoretically be voted on at any point after publication of the report, but difficulties in assembling the needed votes for implementing legislation would likely delay the process. The Trump Administration may still attempt to withdraw from the existing NAFTA as a tactic to force Congress to pass USMCA. It remains unclear how House Democrats or Senate Republicans would react to such a threat. The role of the business community will be key. The White House would look to U.S. business, including agribusiness, to generate bipartisan support for the agreement.

Impact on Future U.S. FTAs: U.S.-Japan, U.S.-EU, U.S.-UK

The U.S. Trade Representative (USTR) notified Congress on October 16 of its intention to begin negotiations for trade agreements with Japan, the EU, and the UK. The earliest that formal negotiations for the Japan and EU agreements could start is January 14, while negotiations with the UK would have to wait until after Brexit on March 29. USTR’s negotiating objectives for these agreements could be published in December or later.

For the new Congress, the Republican majority in the Senate and Democratic majority in the House will have differing sets of concerns for the new negotiations. Senate Republicans will seek many of the outcomes they sought in the NAFTA renegotiation. The Democratic House leadership is likely to call for new measures on labor and the environment, intellectual property, and/or dispute settlement. Some of these, such as opposition to investor-state dispute statement, would resonate with USTR Lighthizer and the White House, though it’s not clear how far the administration would move in the Democrats’ direction on labor or environmental issues. Consideration of the USMCA will be an early test on issues of concern to Democrats that will have implications for other agreements.

USTR is seeking short-term delivery of less controversial outcomes on regulatory alignment and other limited market access issues (such as an enlarged quota for high-quality beef and sales of U.S. soybeans) as part of an early harvest for negotiations with the EU, while with Japan the immediate priorities appear to be focused on market access for autos and agriculture. Such priorities are not likely to require Congressional ratification and so will be less affected by the changes in Congress.

Impact on Section 301 tariffs

President Trump is expected to meet with President Xi at the G20 Summit in Argentina on November 30- December 1. While the White House has downplayed expectations for the meeting, others see the possibility of beginning a meaningful U.S.-China dialogue and perhaps moderating or delaying additional tariff actions. If no accommodation or way forward is reached, the U.S. has indicated it will increase existing tariffs on certain goods from 10 percent to 25 percent in January, with some reports that the U.S. could also impose new tariffs on nearly all remaining Chinese imports. China would likely respond in kind to any new tariffs.

The new Congress is not likely to change the direction of the U.S. economic relationship with China, although the plight of U.S. farmers facing their worst economic year in a long time might have some effect in pushing individual Members of Congress to seek a moderate course. We expect Republicans in the Senate will continue to have concerns on the impacts of China’s retaliation on the broader economy, but still be reluctant to contradict the administration’s approach. The Democratic-controlled House may be more enthusiastic in supporting tariffs overall and could give the Trump Administration cover to take a harder line if circumstances warrant, although may push back where there are specific constituent impacts. In fact, if the Trump Administration reaches a deal with China at the end of November (or anytime afterward), incoming House Democrats could use their newfound leverage to criticize the administration’s efforts and seek to outflank the administration on China issues. China policy is certain to figure in both parties’ presidential election campaigns as the 2020 presidential election begins to take shape during 2019.

While the current approach broadly to China is likely to continue, there may be enough bipartisan support for the new Congress to continue pushing the administration for a product-exclusion process for the 10 percent tranche of tariffs announced last September.

Impact on Section 232 tariffs

The Trump Administration has implemented tariffs on all imports of steel and aluminum, subject to certain country-specific exceptions. Negotiations for some country-specific exclusions could continue through 2019 (e.g., for Canada, Mexico, Japan, or the EU). In addition, the Trump Administration is considering implementation of tariffs on imports of autos and auto parts.

Changes to the control of Congress are not likely to affect the ongoing Section 232 tariffs related to steel and aluminum. House Democrats and Senate Republicans are likely to take positions on the Section 232 tariffs based on the economic impact for their district or state. Members from steel-heavy districts and states will continue to be supportive of the tariffs, while those from districts and states suffering from negative economic consequences because of retaliation or increased downstream costs are more likely to oppose.

Unless the Trump Administration imposes additional tariffs, we would not expect the new Congress to pass legislation designed to restrict the president’s Section 232 authority, as introduced by Senator Bob Corker (R-Tennessee) in the Senate and Representative Mike Gallagher (R-Wisconsin) in the House earlier this summer. That legislation did not have the votes to pass at the time, and the new Democratic majority in the House is not likely to increase the chances of passage.

In the area of the administration’s potential imposition Section 232 tariffs on autos and auto parts, the economic consequences of the tariffs and any resultant retaliation from other countries are likely to be broad. We would continue to expect a significant degree of bipartisan Congressional opposition to new Section 232 tariffs on autos.

Interaction between International Trade and Domestic Issues

Domestic factors are likely to dominate in shaping international trade and economic policy over the course of the new Congress and the remainder of President Trump’s term. Emerging issues, including renewed interest in comprehensive U.S. federal privacy legislation, could influence future U.S. trade-related rules (e.g., on cross-border data flows) as well as set policy models that other governments could replicate.

While the Trump Administration may be keen to pivot to international issues given its lack of a Congressional majority at home, its ability to negotiate and conclude agreements on multiple fronts could be complicated as it seeks to manage an increased array of investigations and oversight by the Congress. Add to this the inevitable turnover of Cabinet members and White House and Executive Branch staff changes that will occur after the mid-terms, and the administration may see a temporary hiatus in undertaking new policy initiatives, including on trade.

Furthermore, the upcoming presidential campaign could set the stage for an intra-party debate among Democrats on whether to take an even more hawkish approach on trade issues than the current administration; stay the current course; or return to a more centrist policy as was ultimately adopted by the Obama Administration while in office.

]]>https://www.cmtradelaw.com/2018/11/2018-midterm-elections-update-impact-on-u-s-trade-policy/feed/0Latest Section 301 Product Exclusion Request Status – No Exclusions Granted to Date (Nov. 8, 2018)https://www.cmtradelaw.com/2018/11/section-301-tariff-lists-no-exclusions-granted-to-date-oct-26-2018/
https://www.cmtradelaw.com/2018/11/section-301-tariff-lists-no-exclusions-granted-to-date-oct-26-2018/#respondTue, 06 Nov 2018 13:20:24 +0000https://www.cmtradelaw.com/?p=3269Continue Reading]]>The Office of the U.S. Trade Representative (USTR) previously announced a process to obtain product exclusions from the additional tariffs in effect on certain products imported from China under the U.S. response to China’s unfair trade practices related to the forced transfer of U.S. technology and intellectual property. The 301 lists of products subject to tariffs was determined by a 90-day process that included public hearings and a notice and comment period. You can also find an unofficial spreadsheet with the final 301 lists here.

The USTR also provided an opportunity for the public to request the exclusion of a particular product from the additional duties in order to address situations that warranted excluding a particular product within a subheading, but not the tariff subheading as a whole.

The USTR recently announced that it is still in the process of posting exclusion requests due to the high volume of submissions, and therefore there is currently a lag between the filing of an exclusion request and the posting of an exclusion request when public and confidential versions are been filed. The date of posting is the triggering date for initial comments regarding an exclusion requests. Permissible comments include letters of support as well as opposition. After the comment period is closed, an additional deadline will be established for rebuttal comments.

As of the date of this report, 815 exclusion requests have been denied.

None have been granted.

We hope you find this report helpful and please contact us if you have any questions.

List 1 totaling $34 billion worth of imports is composed of 818 tariff lines, and went into effect on 7/6/2018.

List 2 totaling $16 billion worth of imports was originally composed of 284 proposed tariff lines identified by the interagency Section 301 Committee. 279 of the 284 lines went into effect on 8/23/2018.

TBD – no earlier than March 23, 2021, or the 5th day following the date of a decision from the WTO DSB, whichever comes first.

Status:

No update since May 18, 2018. Ambassador Lighthizer is holding trade talks with Economy Minister Motegi in July. Under Secretary McKinney is also leading a trade mission to Japan to discuss a possible bilateral trade deal.

Update on 10/15/2018: certain HTSUS subheadings covered by the supplemental action were modified as of October 1, 2018. This notice conforms the September 21 supplemental action to the HTSUS modifications in the Presidential Proclamation and amends the prior action taken in the investigation by removing certain subheadings of the HTSUS listed in Annex A to the September 21st Notice. 83 FR 49153.

Update on 8/22/2018: added the Government of Turkey’s WTO response to the U.S.’ doubling of tariffs on steel articles covered by Section 232 imported from Turkey.

Update on 7/13/2018: added link to an unofficial searchable and filterable spreadsheet listing the tariff codes for all three current U.S. Section 301 tariff lists (see last line in Section 301 Status).

Update on 7/11/2018: added new U.S. Section 301 tariffs announced on 7/10/2018.

Update on 7/2/2018: added EU Annex I tariffs effective.

Update on 6/29/2018: added Canadian retaliatory tariffs.

Update on 6/21/2018: added India, Japan, Russia, and Turkey.

Update on 6/18/2018: added China’s Section 301 retaliatory tariffs.

Update on 6/15/2018: added new U.S. Section 301 tariffs; added translated version of Mexican retaliatory measures and updated Mexico section.

Update on 9/18/2018: added the final list of products in List 3, its tariff rate of 10 percent, effective date of 9/24/2018, and tariff rate of 25 percent effective on 1/1/2019. Also, China’s retaliatory action for the new tariffs has been updated. The tariff rates changed for three of the four annexes. The new tariffs are effective on 9/24/2018.

]]>https://www.cmtradelaw.com/2018/10/latest-u-s-trade-actions-tariffs-and-other-countries-retaliatory-measures/feed/0USTR Publishes Notice Formalizing 10% Tariffs on Section 301 List 3 on Sept. 24. CM’s Unofficial List of the Affected HTS Codes Provided Herehttps://www.cmtradelaw.com/2018/09/ustr-publishes-notice-formalizing-10-tariffs-on-section-301-list-3-on-sept-24-cms-unofficial-list-of-the-affected-hts-codes-provided-here/
https://www.cmtradelaw.com/2018/09/ustr-publishes-notice-formalizing-10-tariffs-on-section-301-list-3-on-sept-24-cms-unofficial-list-of-the-affected-hts-codes-provided-here/#respondFri, 21 Sep 2018 13:57:54 +0000https://www.cmtradelaw.com/?p=3133Continue Reading]]>On September 17, 2018, the White House directed the United States Trade Representative (USTR) to implement 10 percent tariffs on nearly all the tariff lines in the original Section 301 List 3 valued at approximately $200 billion. Significantly, the notice does NOT indicate that there will be an exclusion process similar to Section 301 List 1 and 2.